A Quick Look at US Stock Index Movements
A closer look reveals that the Dow Jones Indices in the United States and S
“If you ignore these few stocks, the stock markets are producing very little return this year,” concludes Guy Côté.
Even Canadian banks, which want to be the anchor for Canadian investors looking for yield and security, have not held up since the summer and they are showing significant declines for the year.
At the last meeting of the US Federal Reserve on September 23, Chairman Jerome Powell left no ambiguity about an upcoming reversal in the interest rate trend. There could even be another increase before the end of the year. Based on interest rate futures markets, the probabilities are 38% in the United States and 56% in Canada, reports Guy Côté. “We don’t seem to have reached the interest rate pivot point yet,” he says.
Savers and investors are certainly disappointed with their performance so far this year, but they must still understand that there is nothing catastrophic about it, underlines Daniel Chartier, portfolio manager at Desjardins Securities. “Looking back 10 or 15 years, we see that we have experienced much more unpredictable periods, such as the 2008-2009 financial crisis and the pandemic,” he says.
Despite a difficult context at the moment, the fundamental rules of good portfolio management do not change, according to him. “Asset allocation according to one’s objectives remains the cornerstone of the investor’s investment strategy,” he says.
We must also avoid securities that have reached very high valuation multiples, especially those with high debt, according to him.
Furthermore, the situation is conducive to taking advantage of the high rates of return offered by fixed-income securities, namely certificates of deposit and bonds, he believes. As for the stock markets, banks and the telephone sector, thanks to the dividends they pay, are becoming more and more attractive, he emphasizes.
As we still do not know where the pivot point for interest rates is, the context lends itself to caution, believes Guy Côté. For him too, the banking and telephony sectors are interesting, as is cash which offers a good return without risk. It would also add the basic consumer sector, namely basic necessities and retail trade.
As for technology stocks, he needs them in his portfolio to ensure a good balance. “Artificial intelligence will continue to be a growing sector, but you have to be opportunistic and disciplined enough to buy these stocks during corrections,” he says.